It was a relatively slow week on the markets, as the summers generally are. However, there was pretty big news from recent Bull List addition Cargojet that I’ll discuss, and then I’ll dive into the rest of the US Foundational Stock reviews, with the best performers being the highlight of this newsletter.
As I mentioned in last week’s email, I haven’t made any recent transactions to my portfolio due to my need to pull cash out for renovations. I imagine I will start making routine purchases again by the end of July.
Cargojet inks a new deal with Amazon
One of the main reasons Cargojet’s stock was getting held back over the last bit was the expiration of its deal with Amazon. Although an end to the contract was unlikely, if it had not been renewed, there would have been a material hit to Cargojet’s overall business, as Amazon makes up a double-digit percentage of revenue.
However, the deal was signed earlier this week, which extends the agreement between the two companies up until March of 2029. After that date, Amazon will have the option to renew the contract again for 2 more years.
The one bright spot about this contract is that it carries minimum volume guarantees, which means regardless of how much Amazon is shipping through Cargojet, Cargojet will still get paid the minimum amount allocated. I cannot see a situation where the popularity of Amazon dips to the point where these conditions need to be utilized, but you never really know. It’s certainly a nice safety net.
The company is up over 50% from the initial position I took back in the mid-$70 range, showing some nice short-term results here. The interesting element of this is my initial thesis on Cargojet was based around the fact that tariffs should boost overall direct shipments from China to Canada and also force provinces to abolish a lot of provincial trade barriers, which again, should increase domestic production.
So the fact we’ve gone from the low $70 range to $110~ per share and we haven’t even come to the realization of my bullish thesis, is a good sign. I’m just as confident adding to Cargojet today at $110 as I was when I initially bought the company in the low $70 range.
I’m fairly bullish overall on a medium-term hold. This deal just further solidifies that.
US Foundational Overview Part 2
Last week we went over the poorest-performing US Foundationals on the year. This week I’m going to focus on the 4 best performers in this basket of stocks. There have been some outstanding performers on the US side this year, and I am fortunate enough to own all of them!
Let’s get right into it.
Blackrock (BLK)
The success of Blackrock on the year isn’t all that surprising when we understand what the company does. Because it largely generates its revenue off fees from investment products, when the markets are doing well, Blackrock will generally see larger inflows, which in turn creates larger fees, which creates larger profits.
The company hasn’t been a market outperformer year to date, but we do need to take into consideration it is up over 42% over the last year, outpacing the S&P 500 by nearly triple.
I’ve attached a chart of the company’s iShares inflows over the last while.
As you can see, the 2021/2022 bear market was relatively harsh on the company, with many investors selling out of funds. As the markets recovered in 2023 and beyond, inflows grew significantly.
Once we understand this, it makes it easier to own Blackrock over the long term without getting worried too much about the stock price. While many companies are cyclical depending on the overall state of the economy, Blackrock is going to be cyclical depending on which direction the market is going.
In terms of valuation, there is no questioning the fact that Blackrock is expensive here. It is trading at a double-digit premium to historical averages. However, as I’ve highlighted in the chart below, if people had bought the company when it traded at double-digit premiums to historical averages before, they still realized strong returns; they just needed to wait a bit longer.
The stock’s near-term prospects hinge on market performance and flows. A market sell-off could hurt fee revenues. On the flip side, if the markets continue to go on a tear like they have been, Blackrock will more than likely benefit.
I simply hold this one long term, paying particular attention and adding more on the market lows and less on the market highs.
Visa (V)
For the longest time, pundits had stated Visa was overvalued. Even looking back to 2020/2021, there were many analysts who believed these payment processors had had their large run and were bound to slow down. Visa doesn’t seem to be slowing down at all. In fact, it’s seemingly picking up speed.
Despite a large economic slowdown, consumers are still utilizing credit cards for everyday spending. There are multiple reasons for this. For one, credit cards these days offer lucrative rewards. Secondly, many consumers are struggling to survive in the current environment when it comes to costs of living. Simple purchases are now being routed through credit cards.
One of the best ways to look at this is the company’s current transactions. The chart is simply amazing, highlighting the economic moat the company has. If you’re making a purchase in-store, there is a good chance it is processed on a Visa payment network, whether it be a Visa credit card or a Visa debit card.
There was a multi-year time period where Visa was cheap, at least compared to historical averages. This is no longer the case.
The company is trading at a double-digit premium to its typical price-to-free cash flow ratio. However, considering the fact that results are ticking upward and the company is expected to post earnings growth in the high teens, I think the valuation is more than justified.
People ask me if I would still add to my Visa position today, and my answer is yes. Is it more expensive than when I was buying it over the last few years? Sure. However, high-quality companies rarely trade at discounts, and if you had bought Visa back in 2021 when it was trading at 35x free cash flows, the stock is up 80%~ since.
There are a lot of fears that stablecoins will impact companies like Visa and Mastercard. All I will say about this is the technology in regards to stablecoins potentially replacing payment railways like Visa and Mastercard are a long way away.
I could easily see Visa integrating potential stablecoins on its network and benefitting from them, much like it has over the years, rather than being replaced by them. This news has no doubt caused some volatility in the company’s share price as of late, but I’m not concerned whatsoever.
Berkshire Hathaway (BRK.B)
Earlier in 2025, Berkshire was thriving. As market uncertainty took hold in regard to market tariffs, Berkshire continued to rise in price. This isn’t all that surprising, as the stock has proven to be extremely resilient in times of market uncertainty.
For one, the company sitting on over $300B in cash makes it an attractive opportunity during market drawdowns. If markets continued to head south, Berkshire would likely be able to deploy a lot of that cash into equities at higher rates of return.
In addition to this, the company has always been somewhat of a defensive play and tends to do better as the markets perform worse.
The other headwind the company has faced, and is what caused the slide in early April, is the resignation of Warren Buffett as the CEO of the company at year’s end. This is no doubt sad news, but don’t mistake this for a surprise. This was something all Berkshire holders, myself included, had come to expect.
I will admit, I expected Buffett to be at the helm of Berkshire until he inevitably passed away. However, with him being the age he is, I accepted the fact that this was likely to happen in the next few years. So, his stepping down was certainly a significant event, but I have full confidence that the management team that is put in place in his absence will be able to provide outstanding returns for investors.
I find it funny that investors understand how particular Buffett is and how much attention to detail he has, and yet somewhat question the replacements he has been vetting within the company for the better part of 15 years. This is one of the greatest investors of all time, and his succession plan has been in the works for many years.
Greg Abel will be the next CEO, someone who has been with the company for decades. Although it is unlikely he is able to generate the types of returns Buffett did, he doesn’t really need to for the company to be a solid investment. It is important to remember that one of the best investments of Berkshire Hathaway’s history was Apple, one that Buffett was adamant they not buy until his investment advisors convinced him to.
Although the company’s manufacturing, railroad, and utility segments have struggled over the years, its insurance segment has more than made up for this. When interest rates begin to fall and the economy picks back up again, I expect the additional segments of the business to pick up steam and continue to drive double-digit earnings growth for the company.
Berkshire is the largest equity holding in my portfolio, and I have no plans to change that anytime soon.
Starbucks (SBUX)
Starbucks has been on a wild ride the last few years, and I will admit it is one of my more frustrating holdings among my US equities. The company can’t seem to get out of the rut it has been in. However, it is making some solid progress under new CEO Brian Niccol, and we’re starting to see this in the company’s results.
I am not one to hold on to too many “turnaround” projects. Usually, I will sell the stock and move on. However, Brian Niccol is well known for his work with the complete turnaround at Chipotle, evolving it into one of the best quick-service restaurants in the country. So, I am willing to give the company the benefit of the doubt.
The key risk here for the company is a continued consumer pullback. I’m sure you’ve been to Starbucks at some point in time and know that their drinks are by no means cheap. This would be even more amplified if inflation ramps back up again. Look to the chart below of total transactions. The company was treading water for a bit, but ultimately, high inflation and a stingier consumer was hard to offset, with transactions starting to decline in early 2024.
However, I’m more inclined to believe that we will see normalized inflation and declining rates south of the border by the end of 2025, which ultimately should help Starbucks when consumers open their wallets back up and start spending again. Strategically, Starbucks is committed to not raising prices further in 2025, aiming to drive volume and experience instead.
This is something that could gain the respect of consumers and could pay off in the long term. However, what this means is that if inflation starts to creep back up again, margins will be impacted.
Starbucks is a company that I am currently on the fence with. I have accepted the fact that in order to realize the potential turnaround of Niccol’s guidance, I will need to hold the company for at least another 12-18 months. After that, I will either see much higher returns in the event of a completed turnaround, or I will simply move on and sell the company.
